How much is a customer worth to you? Predict this number and you know how much it is worth to spend on your customers to keep them around.
Customer lifetime value, or CLTV, is one of the most important metrics a business has for making smart decisions.
You also know, by raising your CLTV benchmark by X percent, how much more cash your business stands to earn over the long-term. The more you can influence this number, the more growth you can expect.
Figuring out how to maximize your CLTV is like discovering the philosopher’s stone of marketing. Turn lead into gold, cure illness, and grant immortality to your business – well at least grant it higher long-term profits.
Quick Takeaways
- Encourage long-lasting relationships to see recurring revenue.
- Make your customers feel heard.
- Drive return sales through loyalty programs and cross-selling.
- Invest in great customer service training.
What Is CLTV?
When you’re assessing the growth of your business, a simple metric like investment return isn’t gonna be enough. You want to see recurring revenue here – after all, it’s what’ll keep your business going in the long run. To see this recurring revenue, it’s crucial that your customers are standing by you for an extended period of time — A.K.A: customer lifetime value.
To understand how to enhance your customer lifetime value, first look at the three factors that go into it:
- Average Transaction Value
- Number of Repeat Sales
- Average Customer Retention Time
Multiply these three factors together and you get your CLTV. The TLDR here? Increase any one of these metrics and your CLTV goes up. This means that maximizing the lifetime value of each customer really boils down to:
- Up-selling
- Encouraging more transactions in each sale, or cross-selling
- Boosting the frequency of transactions
- Driving customers towards more meaty purchases
- Keeping them in the business relationship for more time
The last one here is the most powerful way to maximize customer lifetime value. You can up-sell or cross-sell all you want, but by just focusing on customer retention strategy, you can yield sustainable benefits to your CLTV.
Why? Because when you develop effective strategies for boosting customer loyalty, you encourage long-lasting relationships. Your customers will stick with your brand because they want to. They willingly become a voice for your brand.
This translates to greater long-term profits without having to take a sales-heavy approach to every business transaction. Customer retention means longer business relationships and an easier time acquiring new ones as your existing customers work to further authenticate your business.
As Dale and Ben Midgley write in Golden Circle Secrets, “Do what makes people feel good and they will continue to buy from you and to refer others to you who will also continue to buy from you.”
On the other hand, pushing sales too much can have a negative impact. Once you push your buyers past their threshold, they’re going to turn their attention to holding onto their wallets rather than seeking out the products and services that they need.
To maximize your CLTV, you’ll need to combine all of the formula factors in a way that works for your brand and your industry. Here are the best methods that you can start implementing to get more out of your customers – without pushing them away in the process.
Increasing Your CLTV: The Best Techniques
1. Better Communications
How do you make someone feel special in any relationship? You listen to them. When it comes to marketing, ‘listening’ takes on a more active meaning but it’s essentially the same idea.
Improve your listening and overall communications through well-researched buyer personas and customer segmentation. Learn more about your customers through feedback channels, customer analysis and market research.
Image Source: Digital School of Marketing
Enhance your buyer profiles. Then, figure out your buyer intent by using marketing automation software so that you can deliver targeted, effective communications to your buyers that makes them feel heard.
2. Go All Out
Nurturing your existing customers can be as simple as going out of your way to do something special. It’s amazing how reaching out to people – not to sell, but to just simply connect – can have a positive impact on the relationship.
Send a personal thank you message. Offer a special gift or deal based on a customer’s unique preferences. Be creative. When you’re working with a higher CLTV, investing a few dollars into something special is well worth it to really wow a customer.
3. Inspire Loyalty
More and more businesses have been using loyalty programs as an effective tool for increasing CLTV. In fact, Oracle reported that in 2021, 73% of U.S. adults belonged to at least one loyalty program.
Here’s a couple ‘must-haves’ if you’re looking to polish up your current loyalty program, or just trying to start one.
- Make sure it’s easy to join, and simple to understand
- Allow members to accumulate points quickly
- Provide relevant rewards
- Encourage engagement
Loyalty programs also help to identify who your most valuable customers are in the first place. These customers will also be more likely to recommend your business to others if you have a great loyalty program. This approach rewards existing customers by giving them something back for staying in the business relationship longer.
4. Drive Value: Cross-Selling and Up-Selling
When you walk into your favorite coffee shop to get your morning coffee, you expect to be asked if you want something to eat with it. It’s part of the ritual between you and your barista. It’s a good thing, too. After all, what’s more perfect than a warm buttery croissant with your coffee to start your day?
Whether it’s wine with cheese, socks with shoes, or a warm croissant with your coffee, these add-ons don’t just pair well—they add value to the consumer and their experience. If a cross-sell will add value to your customer, just mention the option.
When up-selling, make it worth it. Try to put yourself in the shoes of your customers. Think: “what’s in it for me”? If you’re struggling to think of an enticing deal,here’s a couple examples to get your creative juices flowing
- 30 percent off when you purchase two items
- A special discount for signing up for a year-long subscription
- Waived fees
When you increase that average transaction value, you’re maximizing your CLTV. Make it worthwhile for your customers, and you may score some customer loyalty points in the process.
5. Stay relevant with your online presence
Out of sight, out of mind; right? Your business should never be either of these. The more relevant your brand is, the more you’ll be in your customers’ minds the next time they consider making a purchase. Staying relevant consistently online is super effective in boosting that repeated sales number.
Publishing content consistently on your website and staying active on social media will serve as an easy, gentle reminder that your brand is there for your customers when they need you.
6. Level Up Your Customer Service
A recent survey published by Forbes found that businesses end up losing upwards of $75 billion each year simply due to poor customer service.
Every individual who interacts with your customers should be an expert liaison between the customer and your business. This is where programs like Google Reviews or Yelp can really help you. Make sure your customers are given the opportunity to provide feedback about their experience so that you know exactly where improvements are needed.
Take a proactive approach to training and guiding your sales team to ensure that their standards for customer service are through the roof. You want to empower your team so that going the extra mile for loyal customers is a no-brainer and company standard.
Sometimes the best way to really wow your customers just comes naturally and is very ‘in the moment.’ You don’t want your business to miss those golden opportunities to impress your existing buyers because your sales team has to ‘okay’ a decision with another department.
Perfecting Your CLTV Formula
All of these methods will help you to maximize your customer lifetime value – and fortify long-term business growth. To get the most out of your CLTV optimization efforts, try a few different methods and measure their impact to identify your strongest tactics.
The overall strategy you use depends on what works for you. Keep playing with the possibilities until you find your perfect CLTV formula.
Maybe your brand does benefit the most from focusing on transaction value. Some businesses may see the greatest impact from investing in better customer service, while others may benefit the most from improved customer segmentation and personalized communication.
The easiest thing you can do right now to increase CLTV? Start publishing content consistently! Weekly content converts users into paying customers, which will boost that weekly sales number we keep talking about.
If you feel stuck, set up a consultation with us here. Or, check out our SEO Blog Writing Services.
The post 6 Powerful Methods to Maximize Customer Lifetime Value (CLTV) appeared first on Marketing Insider Group.
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